 What determines entrepreneurial clusters?Luigi Guiso and Fabiano Schivardi No 806, EIEF Working Papers Series from Einaudi Institute for Economics and Finance (EIEF) Abstract: We contrast two potential explanations of the substantial differences in entrepreneurial activity observed across geographical areas: entry costs and external effects. We extend the Lucas model of entrepreneurship to allow for heterogeneous entry costs and for externalities that shift the distribution of entrepreneurial talents. We show that these assumptions have opposite predictions on the relation between entrepreneurial activity and firm level TFP: with different entry costs, in areas with more entrepreneurs firms' average productivity should be lower; with heterogeneous external effects it should be positive. We test these implications on a sample of Italian firms and unambiguously reject the entry costs explanation in favor of the externalities one. We also investigate the sources of external effects, finding robust evidence that learning externalities are an important determinant of cross-sectional differences in entrepreneurial activity. Pages: 35 pages Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eie:wpaper:0806 Access Statistics for this paper More papers in EIEF Working Papers Series from Einaudi Institute for Economics and Finance (EIEF) Contact information at EDIRC. |
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